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Equities consultant David Iron must have figured he had nothing to lose.
“Not dissimilar to the way my home life operates, it seems that I am always the last to know,” he wrote in an email to colleagues as he digested the news that ANZ was shutting down his division, ANZ Equities. Formerly known as Linwar Securities, the small-to-mid-cap research house had only recently been acquired by ANZ.
It’s rare that leaders get such an honest response from one of the underlings tasked with putting their grand plans into action. With so many companies undergoing vast corporate restructurings, including Billabong, Perpetual and Goodman Fielder, such pushback could expose their best-laid plans to scrutiny and stir up internal dissent. It’d be remiss of LeadingCompany not to draw some lessons from ANZ’s predicament.
But first, because they’re so fascinating, the particulars.
Linwar Securities, an institutional broking firm specialising in mid-cap companies, was founded in 2002 after BNP Paribus exited its Australian investment banking operations. Its name is an acronym: life is nothing without a risk.
Linwar was originally owned by its staff, until online share-broking platform E*Trade bought half the firm in 2005. That half was then bought out by ANZ in 2007. Last November, ANZ acquired the half of Linwar it did not already own. At the time, there were no job losses expected in Linwar’s 20-person team.
ANZ bought in a new head, Steven Ziloli, who in March said the Linwar/Equities division didn’t meet ANZ’s standards for revenue per employee. The bank fired three research analysts and moved two into sales roles, while telling the remaining analysts to stop covering companies and produce macroeconomic research instead.
And then, last Sunday, ANZ announced it was closing what remained of Linwar and firing the firm’s employees. Most of them – 16 since the acquisition – have already left, meaning the announcement affects just nine who remain.
Iron doesn’t agree, and took the opportunity to say so while he had the chance in an email to co-workers, leaked to AFR yesterday.
“It is hard to mask my disappointment with this decision… I firmly believe that we were at the very early stages of shaping a very different but highly relevant institutional brokerage business which complimented [sic] ANZ’s core activities whilst delivering a different value proposition to institutional investors,” he wrote.
“C’est la vie. What would I know about the sharemarket after working in it for 27 years?”
Iron is a senior Australian banker, having previously worked with the Royal Bank of Scotland in Australia and at investment bank Moelis & Co.
“Today I have been advised that ANZ is closing down ANZ Equities and therefore my services are no longer required. Sadly I am the only one surprised by the news as it has been widely leaked internally over the last week.”
It’s a stark warning to leaders pushing through change. Tread carefully, or the people you’re firing may figure they’ve got nothing to lose by airing your dirty laundry.
› Closing a division requires communication
In organisational change, there are always winners and losers, says Brian Gardner, general manager at career advisory The Donington Group.
“There’s always going to be people who think it’s a good move and others who think it isn’t. Decisions will have to be made, and the question is how you communicate to make the best of the situation,” Gardner says.
Listed companies have a legal obligation to reveal all material information to shareholders, which can make it difficult for them to keep staff in the loop without revealing incomplete information to the market and to their competitors.
But while it is difficult, it’s best to aim for openness.
“I’m actually a great believer in communicating as clearly, early and openly as one can. People are not stupid. If you treat them as objects instead of people, you can do a lot of damage to your workforce and to your brand.”
› Procedural justice
The key to treating employees well while closing a division, says change consultant Jennifer Frahm, is procedural justice.
“Employees can cope with most bad news, provided there’s a sense of procedural justice. They want to know the process and procedure leading up to a decision is fair,” she says.
“When to communicate is important, but so is how you came to the decision. If their poor performance is entirely new to employees, it’s seen as not fair.”
In his missive to colleagues, Iron said he was “the last to know” about the decision to shut his division. This is despite Linwar having been downsized in the previous few months, which could be seen as a clear signal of ANZ’s concerns about the broking firm.
“’No surprises’ is the mantra,” Frahm says. “If there is change coming, you want people to know it’s coming. That’s the best-case scenario.”
› The costs of getting it wrong
ANZ’s problems are likely to play out far from the media’s gaze. While the leaked letter makes for good headlines, it’s the effect on morale that will have a long-lasting impact on the organisation.
Downsizing or dismantling a division are both just terms for firing people. And firing people badly can make all your staff unproductive and insecure.
When people see their colleagues let go, they often suffer survivor’s guilt, says Frahm. “The big problem is, typically management perceives that anyone who is left will be grateful and work harder. That’s not what happens.
“Those who remain go through a whole range of repercussions – grieving for colleagues who have left, guilty they have a job, and anxious about the future. They have to process that before they can get into a productive mental space.”
The key to not losing trust with the rest of your workforce is to not lose it with those you’ve sacked.